PHOENIX (AP) — The Arizona Supreme Court on Thursday ruled that the state’s voters do not have the right to reject a massive income tax cut approved by the Republican-controlled Legislature and Gov. Doug Ducey last year.
The decision means a tax cut is in effect that will hit nearly $2 billion when it is fully in place and mainly benefits the wealthy.
The high court overturned a lower court judge who ruled in favor of education advocates who collected enough signatures under the state’s referendum law to block them from taking effect until voters could weigh in in November.
Lawyers for the Arizona Free Enterprise Club, a conservative pro-business group that pushes for lower taxes and regulations, argued the state constitution does not allow referrals for measures that provide for the “support and maintenance” of state government and that the tax cut bill falls into that category.
The Supreme Court agreed in a brief order issued just two days after it heard arguments in the case. The order signed by Chief Justice Robert Brutinel does not explain the court’s reasoning, saying a full opinion will be released later.
The lower court judge had said that the constitutional provision only blocked referendums on bills that appropriate money, and since the tax cut bill does not do that, it is subject to voter review.
Tax Cuts for the Wealthy
Most residents won’t see much help, because the vast majority of the tax cuts go to the wealthy.
The Legislature’s budget analysts said the average Arizonan earning between $75,000 and $100,000 will save $231 a year in state income taxes. Meanwhile, the average taxpayer earning between $500,000 and $1 million a year will save more than $12,000, according to the Legislature’s budget analysts.
Under the new law, rates for most taxpayers would drop to a flat 2.5%—down from a range of 2.59% to 4.5%, placing billionaires in the same tax bracket as everyday Arizonans.
A dozen of the world’s 2,268 billionaires live in Arizona—and as of April 11, held a combined $41 billion in wealth—according to the latest Forbes list.
Those in Arizona’s three comma club increased their wealth by 85%, or $18.6 billion, over the first two years of the pandemic, according to an analysis of Forbes’ data by Americans for Tax Fairness and the Arizona Center for Economic Progress.
Meanwhile, the median income of an Arizona household in 2020 was $66,628, according to Census Bureau data.
The coalition of progressive groups that backed the referendum slammed the Supreme Court for “stripping the rights of everyday Arizonans, in an attempt to protect the rich.”
“The ballot was Arizona’s last line of defense from the Ducey-packed Supreme Court—today that defense has fallen,” said the statement from two groups backing Invest in Arizona. “Despite the explicit and strong language of the Arizona Constitution granting the people a co-equal right to legislate, they have been shut out.”
The Arizona Center for Economic Progress and the Children’s Action Alliance said voters have repeatedly backed measures that boosted school funding, child care and other progressive causes, only to have them blocked by the high court or erased by the Legislature. Earlier this year, a Supreme Court decision led to the demise of a tax on the wealthy designed to fund schools that voters approved in 2020.
That came after lawmakers passed a law during last year’s session that would have cut the expected $900 million in funding by more than half.
Those Celebrating the Win
Ducey, a Republican who pushed for an expansion of the court in 2016 that has allowed him to appoint six of the seven justices, hailed the decision.
“This ruling is another big win for our state’s taxpayers and it couldn’t have come at a better time,” he said in a statement. “With inflation hitting Arizonans hard, this decision ultimately means more of their hard-earned dollars can stay in their wallets.”
Free Enterprise Club President Scot Mussi called the Supreme Court ruling a “big win for taxpayers.”
“Invest in Arizona and out-of-state special interest groups need to accept this reality and stop making a farce of the referendum process,” Mussi said in a series of tweets.
Arizona’s constitution lets voters block newly enacted laws by collecting signatures from 5% of qualified voters. If they do, the law is put on hold until the next general election.
Lawmakers at the Capitol were split along party lines, just as they were last year when majority Republicans who hold bare majorities in the House and Senate enacted the tax cuts with no Democratic support.
Republicans were planning on getting around the referendum by repealing the tax cuts and enacting larger ones, but that will no longer be necessary.
House Majority Leader Rep. Ben Toma said the decision provides clarity and certainty, and means tax historic relief is not in effect. Sen. Rebecca Rios, who leads minority Democrats in her chamber, said she was “disappointed to say the least.”
“A true Democracy should have no problem allowing this to go before the voters of Arizona,” Rios said in a statement. “Republicans continue to attack our schools, teachers and students, despite a majority of Arizonans making it clear time and time again that they want meaningful investments in our public schools.”
The Associated Press contributed to this report.
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